Lenders Are Warned on Risk

Regulators Act to Pop a Potential Bubble Caused by Surge in Leveraged Credits

By

Michael R. Crittenden And

Matt Wirz

March 21, 2013 8:09 p.m. ET

U.S. regulators Thursday warned about the dangers lurking in the booming market for loans to struggling companies, acting to combat concerns over emerging bubbles in parts of the financial sector.

The Federal Reserve and other banking regulators said that the controls and quality checks applied by lenders when extending so-called leveraged loans have deteriorated. They also questioned whether some banks are doing enough to accurately...